Thursday, October 16, 2014

Why Common Carrier Regulation is Such a Bad Idea Now

source: ITU
One of the ironies of the debate over how to best regulate Internet access services is the call for utility style common carrier regulation of the industry, something that arguably could only be argued by observers who really do not remember what monopoly telecommunications was really like.

As the old adage goes, "if you do not know your history, you are doomed to repeat it."

Those who call for a return to common carrier regulation simply do not remember, or have not studied, what end user value, choices, prices and features were like, in the monopoly era. 

According to virtually any analysis, global investment and consumer benefit have improved since the 1980s shift to privatization and competition.
source: Management Information Systems

For example, since 1981, when long distance competition began to take hold in the U.S. market, long distance calling within the continental United States decreased 95 percent.

Since 1999, after the Telecommunications Act of 1996 was passed, business single-line voice prices have dropped 67 percent. Since 1999, T-1 prices dropped 88 percent.

Since the refrain often is heard that U.S. Internet access prices are “too high,” one might say that claim is only possible because “price per Mbps” trends in the U.S. market are ignored.

In the mobile segment, the effective price per megabyte of Internet access has declined from 47 cents per megabyte in the third quarter of  2008 to about 5 cents per megabyte in the fourth quarter of 2010, about an 89 percent decrease.

Likewise, the cost of a text message dropped from about six cents a message in 2005 to about one cent a message in 2010.

On the wholesale side of the business, Internet transit prices declined from about $1200 per Mbps in 1998 to about $0.94 in 2014.

At the same time, end user bandwidth has grown about 50 percent a year.

At the same time, though retail high speed access prices in developed countries have shrunk slightly, as a percentage of gross national income (2.5 percent in 2008 to 1.7 percent in 2012), the effective price per Mbps has declined substantially.  

As is true for many products related to computing, cost might not change much from year to year, but features, processing speed and memory grow at about 60 percent a year.

From 1995 to 2003, for example, the cost of a kilobit per second of internet access fell from about $1.50 per kilobit to about two cents per kilobit.

The point is that calls for a return to utility regulation (“common carrier”) would jeopardize such achievements. Only people who haven’t lived through deregulation and the advent of competition would think common carrier will lead to similar boosts in capacity and declines in cost.

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